News: Investors keen on India's private banks

(TT 01/09/2006) Mumbai - Private sector banks are high on investors’ preference lists. While Chrys Capital has picked up a 5 per cent stake in UTI Bank for Rs 370 crore, a Rs 120-crore block deal in ICICI Bank today saw 20 lakh shares changing hands at Rs 600 apiece.

IndusInd Bank is also on the verge of roping in a strategic investor, which banking circles believe is a foreign bank.

Moreover, the proposed merger of Lord Krishna Bank with Centurion Bank of Punjab has also attracted investor interest.

Market circles feel the heightened interest is because of the bright outlook for the sector and better bank balance sheets. Though advances have been growing at over 30 per cent, the asset quality of domestic banks has improved in the recent past.

The Reserve Bank of India (RBI), in its annual report released yesterday, said the asset quality of banks improved during 2005-06 with gross and net non-performing assets (NPAs) reaching historical lows of 3.5 per cent and 1.3 per cent respectively.

The performance of domestic banks during the first quarter of the current fiscal only amplifies this point.

According to a recent report from Merrill Lynch, while the first quarter displayed a mixed bag of results, “bank earnings were better than we expected, especially the quality of the earnings appeared much better”.

“Net income growth was higher than estimates for most of the banks on account of strong loan growth at over 30 per cent, running ahead of our expectations despite a rise in lending rates,” the report said.